Global sustainable investments to hit $50tn by 2025 despite high fees

There is a growing appetite in ESG investing but the sector's potential can only be fully realised with more standardisation, study finds

ESG investments are increasingly becoming part of companies' portfolios and future growth plans. Getty Images

Assets that comply with environmental, social and governance (ESG) standards are projected to reach about $50 trillion by 2025, but challenges to sustainable investing remain because of a lack of defined standards, a Bloomberg study conducted in co-operation with Abu Dhabi's Mubadala Investment Company has found.

The $50tn figure represents more than a third of the projected $140.5tn in total global assets under management, Bloomberg said in its Sustainable Future Study on Wednesday.

High costs and fees are the main barriers preventing organisations from making ESG investments, despite the fact that there is “great enthusiasm” for it, the study, which polled more than 800 decision-makers from the UAE, UK, China, France and the US, said.

Investment flows to ESG funds fell to $75 billion in the first quarter of 2022 amid a sharp decline in global risk appetite, rising inflationary fears and higher borrowing costs, said the Institute of International Finance research.

This was the lowest level compared with the previous seven consecutive quarters. Inflows to ESG funds in March were $15bn, their weakest since March 2020, the IIF said in April.

“While there’s growing appetite for sustainable investments, ESG’s potential can only be fully realised with more standardisation,” said Ahmed Saeed Al Calily, chief strategy and risk officer at Mubadala.

“There is a clear need for greater co-ordination between the public and private sectors across the world to drive harmonisation. This will help with comparative analysis, investment screening and decision-making, and help drive investments in global solutions.”